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Terry Rondberg, D.C. v. McCoy

September 21, 2009

TERRY RONDBERG, D.C. AND THE CHIROPRACTIC JOURNAL AND JOURNAL OF VERTEBRAL SUBLUXATION, PLAINTIFFS,
v.
MATHEW MCCOY A.K.A. MATT MCCOY A.K.A. DR. MATT MCCOY AND DOES 1 TO 100, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Marilyn L. Huff, District Judge United States District Court

ORDER GRANTING DEFENDANT MCCOY'S MOTION TO DISMISS WITH LEAVE TO AMEND

On March 4, 2009, Plaintiffs Terry Rondberg, D.C. and the Chiropractic Journal and Journal of Vertebral Subfluxation filed their First Amended Complaint ("FAC") against Defendants Mathew*fn1 McCoy and Does 1 through 100 in the San Diego Superior Court. (Doc. No. 1.) The FAC alleged seventeen causes of action: (1) breach of contract, (2) RICO violations, (3) violations of Cal. Bus. & Prof. Code § 17200 et seq., (4) conversion and misappropriation of funds, (5) breach of fiduciary duty, (6) fraud, (7) negligent misrepresentation, (8) accounting, (9) money had and received, (10) libel, (11) slander, (12) invasion of privacy, (13) violation of statutory and common law unfair competition by infringement of common-law trademark rights, unfair and deceptive conduct, (14) false designation, (15) dilution, (16) intentional interference with business relationships, and (17) negligent interference with business relationships. (Id.) On August 3, 2009, Defendant McCoy removed the action to this Court pursuant to 28 U.S.C. § 1441(b), because this Court has original jurisdiction over the RICO violation claim.*fn2 (Id.) On August 10, 2009, Defendants filed a motion to dismiss the FAC pursuant to the Federal Rule of Civil Procedure 12(b)(6) or, in the alternative, for a more definite statement of the claims pursuant to the Federal Rule of Civil Procedure 12(e). (Doc. No. 3.) Plaintiffs filed a response in opposition on September 4, 2009. (Doc. No. 5.) Defendants filed their reply to Plaintiffs' opposition on September 14, 2009. (Doc. No. 6.) For the following reasons, the Court GRANTS Defendants' motion to dismiss Plaintiffs' FAC.

Background

Plaintiffs allege that Defendant Terry Rondberg, D.C. ("Rondberg") and Cynthia Rondberg are owners and sole shareholders of The Chiropractic Journal, Inc. (FAC ¶ 12.) Plaintiffs allege that Rondberg founded the Journal of Vertebral Subluxation Research ("JVSR"), a peer-reviewed scientific journal. (FAC ¶¶ 14-15.) Plaintiffs allege that JVSR operated a website, www.jvsr.com, and received revenue from advertising on the internet and through its publications. (Id.) Plaintiffs allege that on or about April 1, 2000, JVSR, through Rondberg, "engaged Defendant, Matthew McCoy, D.C. to act as the JVSR editor." (FAC ¶ 18.)

Plaintiffs further allege that JVSR's revenue from credit card merchant accounts was processed through the Chiropractic Journal until on or about until April 24, 2006, when Defendant McCoy ("McCoy") reorganized the merchant account to direct charges to JSVR, as part of a scheme to divert JSVR property and money for McCoy's personal benefit. (Id. ¶¶ 22-23.) Plaintiffs allege that since mid-2008, McCoy assumed control of the JSVR's operations and engaged in a "series of unauthorized, un-consented and illegal actions," including: changing the registration of the JVSR's domain name to himself, "absconding and diverting funds of JVSR" for his personal benefit, excluding the Chiropractic Journal and Rondberg from JVSR operations, falsely disseminating statements that McCoy is the owner of JVSR, undermining the operation of JVSR, promoting and operating own projects and business entities on JVSR's website, blocking the Chiropractic Journal and Rondberg from accessing JVSR's books, records, and bank accounts, holding oneself out as the owner/sole director/officer of JVSR, contacting JVSR customers to divert them to bank accounts established by McCoy, abetting unnamed co-conspirators to carry out a common plan to defraud Plaintiffs, engaging in a campaign to disparage and destroy Rondberg and diminish his reputation in the chiropractic community, establishing an enterprise calculated to engage in illegal conduct, including mail fraud and embezzlement, to the detriment of the Plaintiffs, intentionally publishing false statements, private facts and disparaging comments concerning Plaintiffs. (FAC at 6-7.)

Plaintiffs allege that McCoy engaged in malicious and illegal conduct to undermine Plaintiffs' operations and affiliations within the chiropractic community, misappropriated JVSR's trade secrets and customer lists for his own use, and engaged in competitive conduct against JVSR and Plaintiffs. (Id. at 7.) Plaintiffs allege that McCoy hijacked JVSR's website, internet operations, merchant accounts, and internet-related operations. (Id.) Plaintiffs allege that McCoy used JVSR's resources to operate a personal business known as "Glass Houses." (Id.) Plaintiffs allege that McCoy intentionally disseminated false, offensive, private and confidential information and statements in order to cast Plaintiffs in a false light. (Id.)

Plaintiffs allege that since approximately December 2008, McCoy and Does 1 through 50 engaged in a pattern and scheme to embezzle and convert the funds and property of JVSR and the Chiropractic Journal. (Id.) Finally, Plaintiffs allege that they have suffered damages in an amount to be determined, but believed to be in excess of $1 million, as a result of McCoy's and Does' 1 through 50, common plan, scheme, defamation, and illegal conduct. (Id. at 8.)

Discussion

I. Motion to Dismiss Pursuant to 12(b)(6)

A motion to dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims asserted in the complaint. Navarro v. Black, 250 F.3d 729, 731 (9th Cir. 2001). A complaint generally must satisfy only the minimal notice pleading requirements of Federal Rule of Civil Procedure 8(a)(2) to evade dismissal under a Rule 12(b)(6) motion. Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). Rule 8(a)(2) requires that a pleading stating a claim for relief contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The function of this pleading requirement is to "give the defendant fair notice of what the... claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A complaint does not "suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting id. at 556). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 127 S.Ct. at 1965 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235--36 (3d ed. 2004)). "All allegations of material fact are taken as true and construed in the light most favorable to plaintiff. However, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim." Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir.1996); see also Twombly, 127 S.Ct. at 1964--65.

"Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir.1990). The court may, however, consider the contents of documents specifically referred to and incorporated into the complaint. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994).

A. Breach of Contract, Breach of Fiduciary Duty and Accounting

Plaintiffs' first cause of action is for breach of contract. In a breach of contract claim under California law, a plaintiff must allege (1) a contract, (2) plaintiff's performance, (3) defendant's breach, and (4) damages. McDonald v. John P. Scripps Newspaper, 210 Cal.App.3d 100, 104 (1989).

Plaintiffs' fifth cause of action is for breach of fiduciary duty. The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) its breach, and (3) damage proximately caused by that breach. Amtower v. Photon Dynamics, Inc., 158 Cal. App.4th 1582, 1599 (2008). "Whether a fiduciary duty exists is generally a question of law." Id. (citation omitted). "Whether the defendant breached that duty towards the plaintiff is a question of fact." Id. (citation omitted).

Plaintiffs' eighth cause of action is for accounting. (FAC ¶¶ 76-79.) To state a claim for accounting under California law, a plaintiff must allege a fiduciary relationship or other circumstances appropriate to the remedy and a balance due from the defendant to the plaintiff that can only be ascertained by an accounting. See Glue-Fold, Inc. v. Slautterback Corp., 82 Cal.App.4th 1018, 1023 n.3 (2000); 5 Witkin, Cal. Proc. (4th ed. 1997) Pleading, §§ 775-77, pp. 233-35.

Plaintiffs do not allege the existence of a contract, only that Plaintiffs engaged McCoy "to act as the JVSR editor." (FAC ¶18.) Plaintiffs do not allege facts giving rise to any duty between the parties. Instead, Plaintiffs make a conclusory allegation that because McCoy had a duty to manage JVSR, he was required to act as a fiduciary to Plaintiffs. (FAC ¶ 78.) Likewise, Plaintiffs have not established the elements of the claim for breach of fiduciary duty. Plaintiffs only make legally conclusory allegations that McCoy materially breached agreements attached to the complaint as exhibits. (Id. ¶¶ 30-31.) However, Plaintiffs did not attach any agreements to the FAC and do not enhance their allegations concerning the ...


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